The Purchasing Process

Once we have agreed on a price with the vendor, your agent generates a preliminary agreement between the parties. This is often referred to as the Sale and Purchase Agreement (SPA) which spells out the Parties, the Property, the Price, the Payment Terms and the Penalties for non-performance. This is an internal document in English or (English and Bahasa Indonesia) meant for you, the vendor and the agency. The Parties need not be present in Bali to sign this agreement; it can be scanned and emailed back and forth for countersigning. The SPA forms the basis of the AKTA SEWA MENYEWA which is the official lease transfer deed (for Leasehold Properties) or the AKTA JUAL BELI which is the official Buy/Sell Agreement (for Freehold Properties). The AKTA is signed at the notary’s office 30 days (+/-) after all Parties have signed the SPA and the deposit (10%) has been transferred. For this signing, both Parties, or their representative, under Power of Attorney, must be present in Bali.

As the buyer of a leasehold property, you have only one mandatory expense above and beyond the purchase price; that is the 1% of your purchase price fee for the notary to conduct the due diligence to ensure that all of the taxes on the property have been paid and that the licenses are current, that the underlying ownership title has not been used to collateralize another investment and that you have clear and unencumbered access. The notary will also draw up the deeds in Bahasa Indonesia; and in English for an additional fee of less than $100. If you are buying a freehold property, there is a 7.5% transfer tax which is split 5%/2.5% between the buyer and the seller respectively. This tax is not applied to the actual transaction amount, but to the lowest possible amount that the notary can accept, in order to reduce the tax burden.

For somewhere between $10,000 (maybe less, depending on the level of service you require) and 2.5% of your purchase price, you can – if you require – have an English speaking lawyer fully explain the buying process here; your benefits and risks. He then will also be your advocate in Bali in the event that you need one. It’s more of a peace of mind decision on your part. My suggestion is that you can negotiate with the lawyer in an “a la carte” fashion which of his services you would like to use (ie…certified translation of all documents, double checking due diligence, interpreting the master lease between the land owner and the developer, title search, etc.) and then negotiate his fee somewhat. For many of our estate properties, it is not necessary to engage a lawyer as the due diligence on the estate has been done and approved several times already, but that choice is yours.

In any case, your deposit is fully refundable in the event that your legal rep discovers a legal impediment to your purchase, so you are protected from Day One.

The signing of the AKTA at the notary’s office requires at least one person from the buying party to be present, or they can provide a Power of Attorney Agreement to someone here in Bali to sign on their behalf. After signing, the Final Payment is transferred to the seller and the property becomes theirs once the seller has received the Final Payment and the notary has produced the final notarized Agreement.